Weekly Outlook - Oil Spike Risk’s Derailing Recovery

By IBT Staff Reporter On 03/07/11 AT 10:32 PM

Last week's currency trading review

The Dollar was weak but volatile gaining some support from safe haven demand but being sold against the Euro on the widening interest rate differential outlook. Spiking Oil is sending stock markets down as investors fret the speed of the recovery will be affected by extended high petrol prices. February US Non Farm Payrolls gained 192k vs. 63k previously. The Unemployment Rate dropped to 8.9% vs. 9.1%. The Euro was the best performing currency on the back of hawkish comments from the ECB President Trichet on the Prospect of raising rates to combat inflation in the EU. Traders are now pricing in the chance of a rate hike as soon as April and the Euro surged for a test of the key 1.4000 level on Friday. The EUR/USD gained +1.66% closing at 1.3985, after opening the week at 1.3753.

The Japanese Yen was higher on strong crosses but the USD/JPY struggled to maintain gains with bouts of Dollar selling. EUR/JPY shot above on Y115 on Thursday after the ECB meeting hitting fresh 6 month highs. The USD/JPY gained +0.77% closing at 82.30, after opening at 81.67. The GBP tracked the Euro higher but not at the same speed with EUR/GBP rallying to 0.8600 and threatening to trend higher. February Manufacturing PMI remained at 61.5 and Services dropped to 52.6 vs. 54.5 previously. The GBP/USD gained +0.92% closing at 1.6267 after opening at 1.6117. The AUD risk aversion kept the commodity currency subdued even as gold and Oil hit year highs. The RBA held at 4.75% as expected and released a very neutral statement. 1.0200 is the topside resistance while dips towards the key 1.0000 level are expected to be very well supported. The AUD/USD fell -0.38% closing at 1.0136 after opening at 1.0175.

The Forex Trading Week Preview

In the States; On Monday, January Consumer Credit forecast at 3bn vs. 4bn previously. On Thursday, Weekly Jobless Claims are forecast Jobless 380k vs. 368k previously. Also released, January Trade Balance forecast at 41.5bn vs. 40.6bn. On Friday, February Retails Sales forecast at 1.0% vs. 0.3% previously. We will provide our previews and reviews of these data releases in the daily summary.

In the Eurozone; On Tuesday, German January Factory Orders forecast at 2.5% vs. -3.4% previously. On Wednesday, German January Industrial Production is forecast at 1.8% vs. -1.5%. In the UK, On Wednesday, January Trade Balance is forecast -8.6bn vs. -9.2bn. On Thursday, BOE Rate Announcement forecast at 0.5%. On Thursday, February PPI is forecast at 5.3% vs. 4.8% previously. We will provide our previews and reviews of these data releases in the daily summary.

In Japan; On Thursday, Q4 GDP forecast at -1.2% vs. -1.1% previously annualized. In Australia; On Wednesday, RBNZ is forecast at 2.88% vs. 3.0% previously as traders factor in the a potential rate cut given the Earthquake in Christchurch in recent weeks. We will provide our previews and reviews of these data releases in the daily summary.

TECHNICAL COMMENTARY

Currency

Sup 2

Sup 1

Spot

Res 1

Res 2

EUR/USD

1.3744

1.3833

1.3990

1.4086

1.4282

USD/JPY

81.13

81.73

82.35

83.54

83.98

GBP/USD

1.6145

1.6216

1.6260

1.6344

1.6458

AUD/USD

0.9982

1.0088

1.0145

1.0202

1.0256

XAU/USD

1389.00

1409

1436

1442

1450

OIL/USD

103.50

105.0

105.30

106.50

108.00

Euro - 1.3990

Initial support at 1.3833 (Mar 3 low) followed by 1.3744 (Mar 2 low). Initial resistance is now located at 1.4086 (Nov 8 high) followed by 1.4282 (Nov 4 high)

Yen - 82.35

Initial support is located at 81.73 (Mar 3 low) followed by 81.13 (Feb 4 low). Initial resistance is now at 83.54 (Feb 22 high) followed by 83.98 (Feb 16 High).

Pound - 1.6260

Initial support at 1.6216 (Mar 2 low) followed by 1.6145 (61.8% retrace of 1.6031-1.6330). Initial resistance is now at 1.6344 (March 2 low) followed by 1.6458 (Jan 19, 2010 high).

Australian Dollar - 1.0145

Initial support at 1.0088 (Feb 25 low) followed by the 0.9982 (Feb 23 low). Initial resistance is now at 1.0202 (Mar 1 high) followed by 1.0256 (Dec 31 high).

Gold - 1436

Initial support at 1409 (Mar 1 low) followed by 1389 (Feb 21 low). Initial resistance is now at 1442 (1392.65 plus 1418.15-1368.28) followed by 1450 (Round Figure Resistance).

Oil - 105.30

Initial support at 105.00 (Intraday Support) followed by 99.00 (Intraday Support). Initial resistance is now at 103.50 (Feb Spike High) followed by 105.00 (Big Figure resistance).